While everybody is avoiding looking at the weekly crypto charts, the legal developments did not slow down with market structure legislation clearing a crucial hurdle in the Senate and a wild story regarding allegations that the son of a U.S. government third-party custodian made off with a haul of seized crypto. And both the CFTC and SEC pushed out ambitious agendas for digital asset rulemaking with or without further action from Congress, so we can expect a busy spring in crypto law regardless of market structure outcomes.
Here’s everything that happened last week in crypto law:
Senate Agriculture Committee Passes Its Half of Market Structure
The Senate Agriculture Committee held a “markup” of its half of the market structure legislation but there wasn’t much marking up as the bill eventually cleared the committee with no amendments and was voted through along party lines. Notably, Democrats on the committee used their speaking time to take issue with the fact that Republicans took what had previously been a bipartisan product and filled in the remaining sections without Democrat buy-in. Republicans, on the other side, took the position that they waited as long as they could but were forced to move forward, while repeating their promise to ensure Democrat concerns were addressed in the final product.
Tl;dr– There were some questions on if Senators would push for the bipartisan Credit Card Competition Act to be added to the bill, but that proposed amendment was withdrawn last minute. Everything else happened as expected, with the bill moving forward along party lines while both sides committed to continue working on a product that could pass the Senate’s 60 vote threshold. It would have been nice to get bipartisan support for this half of the bill that has the more vanilla half of market structure with most contentious issues being dealt with in the Banking Committee’s portion, but at least the process is moving forward after being stuck in both committees since the House passed the CLARITY Act in the spring of last year.
SEC and CFTC Chairs Hold Joint Fireside Chat Regarding “Project Crypto”
Chair Paul Atkins of the SEC and Chair Michael Selig of the CFTC held a joint fireside chat to reiterate their commitment to working together as agencies especially regarding new markets and technologies enabled through crypto. Chair Atkin’s intro speech is available here and Chair Selig’s intro speech is available here. After both speaking, they sat down for an interview where they expanded upon their plans which include the agencies entering a memorandum of understanding and engaging in joint rulemaking to make it more difficult for future administrations to have a single agency head act unilaterally after the joint authority precedent is set.
Tl;dr– Both Chairs emphasized that longstanding jurisdictional gaps between the agencies have fueled regulatory arbitrage and pushed innovation offshore, particularly in areas such as perpetual derivatives and digital assets, and argued that harmonization, short of any agency merger, is essential to maintaining U.S. competitiveness. While Chair Atkins largely restated things he has said since he was first appointed, Chair Selig used his first official speech as an opportunity to lay out his ambitious agenda for the first time. This includes potentially involving the agency in ongoing litigation around prediction markets, which would be a huge move for an agency which has traditionally avoided taking a stance on such issues in favor of letting courts decide the bounds of the CFTC’s regulatory exclusivity. Both Chairs also emphasized the need for legislative clarity from Congress, while also stating they would not sit idle waiting and would move forward with their regulatory agendas while remaining ready and willing to act based on whatever Congress decides to do re: market structure.
OTHER STORIES
The DAO is Back Securing ETH: Ten years after the hack which nearly broke the Ethereum network in its early days and resulted in a contentious fork, the funds which were unclaimed in the DAO hack are now being used to fund the Ethereum network’s security budget. This is while there are interesting debates ongoing on if stablecoins make the network unforkable now and what that means for network resiliency.
Pro-Bitcoin Fed Chair Successor: It appears that Kevin Warsh will be the next proposed Fed Chair once Chair Powell’s term comes to an end. While he will certainly be focused on a million other things before crypto, it is still nice to see more and more leaders who understand the technology’s potential.
Prediction Markets Update: The gaming associations have come out in force in their amicus efforts in the Fourth Circuit appeal over whether the CFTC is the exclusive regulatory of events contracts, including sporting event contracts. It will be interesting how these lawsuits change based on the CFTC potentially third-partying in to assert their regulatory authority. As an aside, this is a phenomenal resource for tracking the various prediction market lawsuit pending against state gaming authorities.
Tether’s GENIUS Act Payment Stablecoin Launch: USDT will continue to be backed by gold, bitcoin, and various other assets. Instead of changing the flagship product, Tether is launching USAT which is designed to be compliant with GENIUS Act requirements for payment stablecoins available in the U.S. It will be interesting to see how this effects the market cap of USDT and how redemptions will be handled between tokens.
Fidelity Joins Stablecoin Game: Fidelity is the latest entrant to the stablecoin market with their FIDD token. It makes sense for any asset manager of size to have their own stablecoin if only for instant settlement on their networks while generating yield for the company through reserve backing interest.
Government Contractor Heist: This is a WILD story if it turns out to be true that the son of a government contractor stole millions of dollars in crypto the contract was supposed to be safeguarding and got caught by flexing it online. Kids will be kids (committing lifetime sentences worth of fraud and theft) I guess.
CONCLUSION
If you have any questions or would like me to write about anything else, let me know on Twitter (X?) or Farcaster. As always, I am an attorney, I am not your attorney. For legal advice, you should always consult (and pay for) an attorney.
Outro/Disclaimer: In late 2022, while I was at Polsinelli, I started preparing weekly updates for attorneys at the firm to stay abreast of the latest Web3 legal developments. I now post the weekly updates on my personal blog every Tuesday, where I also provide links to more obscure legal developments and otherwise discuss industry trends and stories. Please note, the views and opinions I express are solely my own. They do not reflect the official stance or endorsement of the Digital Chamber or any of its members.
The NFTtorney 